Dropbox slides after reporting slowest user growth since IPO

(Reuters) - File sharing company Dropbox Inc (DBX.O) reported its slowest growth in paid users since going public last year and fell short of expectations for a quarterly revenue metric that indicates future growth, sending its shares down 5% on Thursday.

FILE PHOTO: The Dropbox app logo seen on a mobile phone in this illustration photo October 16, 2017. REUTERS/Thomas White/Illustration

Dropbox’s paid user growth has been slowing despite its try-to-buy freemium offer, causing investors to worry about its ability to convert free users into paying ones.

The company’s deferred revenue, which measures future business for subscription-based software vendors, rose 6.7% to$517.3 million, but was below estimates of $528.2 million, according to three analysts polled by Refinitiv.

The number of paying users rose to 13.6 million from 13.2 million in the prior quarter and 11.9 million a year earlier. Analysts had expected 13.4 million paying users, according to FactSet.

Dropbox, however, beat profit and revenue estimates for the second quarter ended June 30.

D.A. Davidson analyst Rishi Jaluria said the results beat was much smaller that what is typically expected from the company.

Dropbox competes with Alphabet Inc’s (GOOGL.O) Google, Microsoft Corp (MSFT.O) as well as Box Inc (BOX.N). It reported average revenue per user of $120.48, which narrowly missed estimates of $120.8, according to IBES data from Refinitiv.

The company expects third-quarter revenue in the range of $421 million to $424 million, above analysts’ estimates of $419.2 million.